Tyre import levies, the knee on consumers’ necks

The government’s newly imposed levies on tyre imports have added to consumer burdens.

Despite national government trying to cushion South Africans against rising inflation, the Department of Trade, Industry and Competition (DTIC) seemingly didn’t understand the assignment.

Prepare to pay more just to exist

With the new levies being imposed on Chinese tyre imports:

• Taxi operators to pay 23% more for tyres
• Truck and bus owners 22% more
• Passenger vehicle owners 25% more

“This increase comes at a time when government is debating ways to help South Africans weather the inflationary storm,” said the International Trade Administration Commission (ITAC).

Tyre Importers Association of South Africa (TIASA) is now calling for an immediate reversal of duties to help consumers.

The DTIC on Thursday announced the imposition of a new 38,33% provisional duty on tyres imported from China.

Duties, duties and more duties

This is on top of the import duties that currently exist, of between 25% and 30%. The latest duties will push overall duties on tyres close to the 70% mark.

TIASA says the newly imposed levies mark a fresh blow to cash-strapped consumers, as it will materially impact the cost of transport, food and goods – and, therefore, general inflation.

The provisional duties, which are another tax that consumers and businesses will have to bear, are effective immediately.

Local manufacturers of tyres, Continental, Bridgestone, Goodyear, and Sumitomo – collectively known as the South African Tyre Manufacturers Conference (SATMC) – had applied to ITAC for the imposition of substantial additional duties on passenger, taxi, bus and truck vehicle tyres imported from China.

TIASA Chairperson Charl de Villiers said, “It’s not difficult to see how crippling the impact of these duties will be on consumers.

“What is difficult to understand is that this announcement comes as Cabinet is debating the introduction of an economic relief package to help South Africans survive the rising cost of living and rampant inflation.”

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Latest consumer inflation figures

In late August, Stats SA released the latest consumer inflation figures, which showed that annual consumer inflation reached a 13-year high, increasing to 7.8% in July, from 7.4% in June.

While wages have remained stagnant over the past years, the cost of living has increased sharply.

The average food basket, according to the Pietermaritzburg Economic Justice and Dignity Group, increased by 12.6% between August 2021 and August 2022, and Eskom’s tariff increase for 2022 was at 9.61%.

The cost of transport has also increased significantly. Stats SA said citizens using public transport saw a 9% increase in July, pushing the annual increase to 16.4%.

While there is some good news for commuters and the transport and logistics sector with this month’s decrease in the petrol price, the imposition of provisional duties on tyres imported from China will negate this relief and drive up the price of all tyres.

Local manufacturers argue they need to protect jobs

Since tyres are the third biggest input cost in transport, after wages and fuel, these new duties will have a knock-on effect on the price of goods and specifically food.

“Government’s rationale for the imposition of duties is ostensibly to help protect local manufacturers, but in the case of tyres, the local manufacturers themselves have to import the vast majority (80%) of the over 3000 different models of tyre ranges they sell.

“They have to do this because it is not cost-effective to set up production lines for that many models within one plant,” says De Villiers.

SATMC members have said that they need additional duties to protect jobs. According to them, they employ 6000 direct workers and support 19 000 indirect jobs.

TIASA members, which are all South African wholesale companies, many of which have been in business for two or three generations, employ a collective 3000 people directly, and support at least 55% of those 19 000 indirect jobs claimed by SATMC.

“The point is that every single job sustained in our country is valuable. The additional duties will push many of these companies out of business, destroy jobs, and add an excruciating financial burden on every motorist in the country, every bus company, every taxi owner and every commuter.

“For too long now, trade policy decision makers have had a myopic view on tariffs and duty impositions without considering the broader economic landscape at the time of these applications or the impact that it will have on our country’s people. It is high time this changes,” says De Villiers.

“TIASA calls on government to reverse these duties. There is precedent for Government making bold decisions.”

Earlier this year, government absorbed some of the increases in the fuel levy, passing this saving onto consumers and businesses. Similarly, in August, the Minister of Trade, Industry and Competition decided, in the public interest, to suspend the imposition of anti-dumping duties on imported chicken.

“This shows that government is prepared to make difficult decisions that are in consumers’ best interest,” said De Villiers.

“Large corporates may not like this, but they do benefit the vast majority of the population, who need financial relief now more than ever. Government has promised to find ways to do this, and reversing the duties would be a good start,” concluded De Villiers.

Compiled by Narissa Subramoney

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